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Income Tax Appellate Tribunal, ‘A’ BENCH, CHENNAI
Before: SHRI CHANDRA POOJARI & SHRI G. PAVAN KUMAR
आदेश / O R D E R PER G. PAVAN KUMAR, JUDICIAL MEMBER:
The appeal filed by the assessee is directed against order of the Commissioner of Income-tax (Appeals)-9, Chennai in dt 01.09.2015 for the assessment year 2011-
ITA No.2047/Mds/2015 :- 2 -:
2012 passed u/s.143(3) and 250 of the Income Tax Act, 1961 (herein after referred to as ‘the Act’).
The assessee has raised three substantive grounds against 2.
(i) Denial of exemption u/s.54F of the Act (ii) Addition by the Assessing Officer twice the sale consideration and (iii) Unexplained investment in respect of land.
The Brief facts of the case that the assessee is a retired 3. salary employee of Chennai Port Trust and filed Return of income on 22.07.2011 with total income of �8,76,140/- and the Return was processed u/s.143(1) of the Act on 01.09.2011. The case was selected for scrutiny under CASS and notice u/s.143(2) of the Act was served on the assessee. In response to notice, the ld. Authorised Representative of the assessee appeared from time to time and filed the information. The ld. Assessing Officer on perusal of AIR information found the assessee has made cash deposits of �80,36,000/- in Tamil Nadu Mercantile Bank Ltd between 06.12.2010 to 19.03.2011 and demand draft of �39,00,000/- was credited in bank account and aggregate deposits worked out to �1,19,35,000/-.
The ld. Authorised Representative explained the sources for the deposits alongwith evidence on various dates and submitted that the ITA No.2047/Mds/2015 :- 3 -: assessee inherited from his late father alongwith his mother, four brothers and sister 8.6 acres of agricultural lands at Paruthipattu Village in Avadi and the land was sold for consideration of �5,34,10,000/-. The assessee purchased residential plot at Mangadu and constructed house in the name of his unmarried daughter out of net sale consideration and claimed exemption u/s.54F of the Act. In continuation to the explanation, the assessee clarified that one of the Co-owner being Sister was given dowry and other financial assistance by late father during her marriage and set apart 50 cents of land for the daughter and was sold for �35,00,000/- and Mother of the assessee is also a co-owner who co-operated in sale of land was provided with fixed deposit of �10,00,000/- and After adjusting the share of Sister and Mother the remaining amount was equally shared by five brothers. Out of the sale consideration, assessee availed tax exemption u/s.54F of the Act. The assessee purchased 2380 sq.ft land on 21.01.2011 in the name of daughter at Sree Ambal Gajalakshmi Nagar, Phase II in Mangadu and constructed building with plinth area of 4000 sq.ft. Out of net sale consideration of �97,82,000/- assessee purchased land for �19,33,000/- including document charges 1,60,000/- and spent an amount of �79,49,000/- in construction of house and measuring 4000 sq.ft and total net sale consideration was utilized. The Assessing Officer on perusing the data
ITA No.2047/Mds/2015 :- 4 -: called for additional information in respect of investments by letter dated 20.11.2013 for production of ration card, details of family members, plan approval copy alongwith construction agreement, contract invoices and bills for expenses of material and property tax payments. In compliance to letter assessee submitted ration card, details of family members, building construction plan approved by the Managu Panchayat and assessee under self supervision with the help of M/s. Abasus Properties (P) Ltd constructed six flats.
3.1 In respect of Deposits in TamilNadu Mercantile Bank Ltd, the assessee has furnished banks account copy explaining each credit.
On perusal of the bank deposits and cash withdrawals, the Assessing Officer found that there are withdrawals in the bank account, and was not disputed by the Revenue. The Assessing Officer having satisfied with the assessee share of sale consideration and investment in residential property and compliance of the conditions for claiming exemption u/s. 54F found that the land was purchased on daughter name and flats are constructed. The ld. Assessing Officer recorded statement of the assessee referred at page 8 to 12 of his order were assessee has gave clarification on sale consideration, family details, source for investment in the property and building completion period and bank account details. The Assessing Officer recorded statement
ITA No.2047/Mds/2015 :- 5 -: from unmarried daughter of the assessee on whose name the land was purchased and constructed. The Assessing Officer considering the facts and investment in the name of the daughter has rejected the claim of exemption u/s.54F of the Act. The ld. Assessing Officer on perusal of the bank account found assessee has withdrawn the amounts and paid for purchase of land during period from 08.12.2010 to 4.01.2011. The Assessing Officer alleged that within a span of 28 days, the assessee has totally withdrawn the sale consideration from bank account and is not disputed. The land was purchased in the name of Daughter Selvi D. Devakrubai and withdrawals were utilized for construction of seven flats after obtaining permission from the local authorities. The ld. Assessing Officer verified documentary evidence, sale deed and relied on statement recorded in respect of sale consideration and purchase of the property on suspicion and surmises presumed that entire sale consideration was credited to the bank account and withdrawn and utilized for the purpose other than acquiring the asset and treated the entire sale consideration spent for acquiring new asset as undisclosed investment of �97,82,000/-. The ld. Assessing Officer made an addition for difference in sale consideration after recording of sworn statement that as per the bank statement there is a cash deposit of �1,19,35,000/- whereas sale consideration as per sworn statement to ITA No.2047/Mds/2015 :- 6 -: the share of the assessee is �97,82,000/-. The Assessing Officer treated the difference as unexplained income and overlooked submissions that assessee received sale consideration alongwith his Brothers, Sister and Mother and share of Sister in the sale consideration could not be collected by her and the same was deposited in assessee bank account. The Assessing Officer alleged that there is no satisfactory proof for the source and hastily concluded �21,53,000/- as unexplained income. With above additions, the Assessing Officer finalized assessment and assessed total income �2,26,60,104/-. Aggrieved by the Assessing Officer order, the assessee filed an appeal before the Commissioner of Income Tax (Appeals).
In the appellate proceedings, the ld. Authorised 4.
Representative reiterated the submissions made before Assessing Officer alongwith documentary evidences. The ld. Commissioner of Income Tax (Appeals) found that Assessing Officer has recorded sworn statement u/s.131 from the assessee and daughter and also enquiry conducted by the Inspector of the Office. The ld. Commissioner of Income Tax (Appeals) considered the written submissions of the assessee and findings of the Assessing Officer but concurred with the action of the Assessing Officer were the assessee purchased the ITA No.2047/Mds/2015 :- 7 -: property in the name of daughter and relied on the decision of CIT vs V.R. Desai (Ker) 197 Taxmann.52 and also asset should be purchased in the name of assessee and relied on the following decisions.
‘’1. ITO vs. Prakash Timaji Dhanjode (ITAT, Nagpur) 81 TTJ 694 - Purchase in the name of adopted son. 2. Ram Kishan vs. ITO 2007-TIOL -178-ITAT-Del. 3. Jai Narayan vs. ITO (P & H) 306 ITR 335 - Purchase in the name of son and grandson. 4. Prakash vs. ITO (Mum) 220 CTR 249; 312 ITR 40 - Purchase in the name of adopted son.’’ and rejected the claim of Sec.54F of the Act and also confirmed investment in property as undisclosed investment of �97,82,000/- and the difference in bank deposits and sale consideration �21,53,000/-.
The ld. Commissioner of Income Tax (Appeals) considered the findings of the Assessing Officer, observations and written submissions in the hearing proceedings and concluded as no fresh evidence or submissions are filed in the appellate proceedings and confirmed the additions. Aggrieved by the order of Commissioner of Income Tax (Appeals), the assessee assailed an appeal before Tribunal.
Before us, the ld. Authorised Representative reiterated the 5. submissions of assessment and appellate proceedings and argued that the assessee was denied exemption u/s.54F of the Act and he being a retired employee inherited agricultural land at Paruthipattu adjoining Avadi Municipality as per the will executed by assessee father late
ITA No.2047/Mds/2015 :- 8 -:
Dharmaraj Nadar dated 19.01.2001. The agricultural land inherited by wife of deceased (Mother of the assessee) five sons, sister and mother of the assessee was entitled to life interest till her demise. As
per the family arrangement �10,00,000/- was paid for fixed deposit in the name of mother and �35,00,000/- share of the sister. The property was sold to M/s. Ten Win Properties (P) Limited for a consideration of �5,34,10,000/- and after setting apart of �10,00,000/- to mother and �35,00,000/- for sister share the balance �4,89,10,000/- was divided equally between five brothers and assessee share worked out to �97,82,000/-. The assessee deposited sale consideration in Tamilnadu Mercantile Bank Ltd including installments of mother and sister aggregating to �1,19,35,000/-.
Subsequently, the assessee utilised the entire amounts and purchased land in the name of daughter and constructed the flats on obtaining sanctioned plan and claimed exemption u/s.54F of the Act. The Assessing Officer rejected the claim as the property was not purchased in assessee’s name and sale proceeds were not invested in Capital Gains Accounts Scheme before due date u/sec. 139(1) of the Act prior to the purchase of residential property. The ld. Authorised Representative further substantiated his arguments relying on the judicial decisions and Benami Prohibition Act and explained that land was purchased in the name of unmarried daughter and she was ITA No.2047/Mds/2015 :- 9 -: married subsequently. On the issue of Capital Gains Accounts Scheme the assessee has purchased land immediately after sale of property and withdrew the money from bank account and started construction.
In the present case, the assessee acquired the land before due date of Return of income u/s.139(1) of the Act and further argued that due to dependency of unmarried daughter and to secure her future, he has investment in her name. The action of the Assessing Officer on addition of �97,82,000/- as undisclosed investment in Mangadu property is not correct as the assessee has withdrawn the sale proceeds of agricultural land from Tamilnadu Mercantile Bank Account within a period of 28 days for the purchase of residential land at Mangadu and was purchased by registered sale deed on 21.01.2011 and balance amount were utilized in construction of residential flat and paid advances for purchase of tiles, timber, steel, sand, blue metal etc., The Assessing Officer conducted enquiry and Inspector reported that property was constructed by the assessee but the Assessing Officer under suspicion the entire sale consideration was utilized for some other purpose and the amount invested in construction of property at Mangadu is different and made addition as undisclosed investment without any evidence.
ITA No.2047/Mds/2015 :- 10 -:
The ld. Assessing Officer further made an addition of 6.
�21,53,000/- as unexplained income. The assessee inherited property as the legal heir alongwith Brothers, Sister and Mother. The mother and sister co-operated in selling the property and as per internal family arrangement the Sister is paid �35,00,000/- and �10,00,000/- was paid to the Mother as charge was created as per the will of late Dharmaraj Nadar. At the time of transaction of sale, installment of the sister was paid and was out station and mother was living with the assessee. therefore, amount of �10,00,000/- paid to the assessee’s mother was deposited in assessee’s account and similarly �11,53,000/- installment of sister share was also deposited in bank account. The Assessing Officer recorded the statement and has overlooked the charge created by the deceased father on the property in favour of mother and sister and treated the amount as undisclosed income in the hands of the assessee without considering the will deed.
The ld. Authorised Representative submitted paper book containing various documents of property permit, purchase deed of land, copy of bank account, copy of sale deed and copy of will and English translation of charge created in favour of sister and mother and prayed for allowing the appeal.
ITA No.2047/Mds/2015 :- 11 -:
Contra, the ld. Departmental Representative relied on the 7. orders of the lower authorities and opposed to the grounds of the assessee.
We heard the rival submissions and perused the material on 8. record and judicial decisions cited. On the issue of claim of exemption u/sec. 54F of the Act, the ld. Authorised Representative argued grounds and filed written submissions explaining that the assessee has purchased the land in the name of unmarried daughter who was dependent and before due date of filing of return of income u/s.139(1) of the Act. Therefore, the assessee has not made investment under Capital Gains Accounts Scheme. The ld. Counsel drew attention to the paper book and explained the construction of residential property.
We perused the provisions of Sec. 54F of the Act which are beneficial provisions but exemption u/s.54F has to be claimed only by purchasing constructing new residential property in assessee own name and not on his unmarried daughter. This exemption is exclusive to be claimed by the assessee which cannot be clubbed or applied to the blood relation or family members and also rely on the decision of Prakash vs. ITO 173 Taxmann 311 (Bom) 2008 were the lordship have considered that the exemption should be allowed only in the name of ITA No.2047/Mds/2015 :- 12 -: the assessee confirm of the order of the Commissioner of Income Tax (Appeals) on this ground and dismiss the ground of the assessee.
The ld. Assessing Officer has made an addition of �97,82,000/- to the returned income without considering the facts that the assessee has received net consideration for his share �97,82,000/- and the Department has not disbelieved and accepted. The assessee withdraw the amount from Tamilnadu Mercantile Bank Ltd and used for registration of land and the construction of residential property under self supervision and with the support of family members.
The ld. Authorised Representative drew our attention to Tamilnadu Mercantile Bank account at page 55 of paper book explaining the credits of sale proceeds deposited from 6th December, 2010 to 15th December, 2010 and the assessee has withdrawn the total consideration during the period from 21st December 2010 to 4th January, 2011. It is clearly evident from action of the assessee that money was withdrawn and utilized for purchase of land in the name of daughter on 21.01.2011 before the end of the previous year and commenced construction of residential flats. The findings of the Assessing Officer based on suspicion without considering the construction expenditure incurred towards labour, materials on day to day basis being highly
ITA No.2047/Mds/2015 :- 13 -: unorganized sector. The observations of the Assessing Officer that the money has been used for some other purpose and investment are made in the construction of the residential property is from undisclosed source which are different from Tamilnadu Mercantile Bank Ltd are without any basis or evidence. But on perusal of Bank account produced in hearing proceedings, we found that cheques were also issued in the name of the persons, and there is no clarity on issue whether the said sum was utilized for the construction of residential building. Therefore, we are of the opinion that the matter has to be re-examined by the Assessing Officer in the above context.
Considering the apparent facts and circumstances, we set aside the order of Commissioner of Income Tax (Appeals) and remit the issue to the file of Assessing Officer for verification.
On the last ground, the ld. Assessing Officer made an 10. addition of �21,53,000/- being not satisfied with the submissions on the internal family arrangement between the family members of the assessee. The mother and sister co-operated in the execution of sale deed of land and �35,00,000/- was allotted towards sister share and �10,00,000/- to the mother. Since the sister was not available at the ITA No.2047/Mds/2015 :- 14 -: time of transaction, installment amount of share of sister and mother share �10,00,000/- as mother was living with the assessee was deposited in assessee’s bank account. The ld. Authorised Representative emphasized without the help and co-operation of the mother and sister the land deal could not have been completed. The Assessing Officer on suspicion treated difference of �21,53,000/- as unexplained income without any evidence or statement recorded from assessee’s mother or sister. The ld. Assessing Officer has relied on the sworn statement of assessee and daughter and made elaborate findings in his order on addition. The Assessing Officer’s observation of unexplained income is on imagination overlooking the fact that the life interest is created for assessee’s mother and sister by will of late Dharmaraj Nadar (father) in the year 2001. The ld. Assessing Officer hastily based on assumption made an addition without considering the basic realities of blood relations and their influence in completing the sale transaction. Therefore , considering the apparent facts and circumstances, we are of the opinion that matter need to be re- examined as ld. Assessing Officer has not recorded any statement or made inquiry on this aspects. We set aside the order of Commissioner of Income Tax (Appeals) on this issue and remit the entire issue to the file of the Assessing Officer for limited purpose only to verify the ITA No.2047/Mds/2015 :- 15 -: excess amount in bank amount pertains to mother and sister of the assessee. The assessee should be provided adequate opportunity of hearing heard before passing an order. This ground of the assessee is partly allowed for statistical purpose.
In the result, the appeal of the assessee in ITA 11. No.2047/Mds/2015 is partly allowed for statistical purpose.
Order pronounced on Thursday, the 7th day of April, 2016, at Chennai.